The Supreme Court of the United Kingdom is expected to render a historic decision today which could have one billion pounds for banks and have an impact on millions of motorists.
The essential question to which the country’s superior court was invited to answer is: should customers be fully informed of the concessionaires of the Commission to be won on their purchase?
However, the Supreme Court only considers one of the two cases executed in parallel concerning the erroneous sale of cars financing.
Here is everything you need to know about both cases and how the decision this afternoon can (or not) affect a future remuneration system.
PA file peak
What is the Supreme Court who plans?
The Supreme Court affair concerns complaints linked to the non-disclosure of the Commission. This applies to 99% of automotive financing cases.
When you buy a car in finance, you are actually loaned the money, which you pay in monthly payments. These loans have an interest, organized by brokers (people who sell you the financial plan).
These brokers earn money in the form of a commission (which represents a percentage of payments of interest).
Last year, the Court of Appeal ruled in favor of three motorists who were not informed that the automotive concessionaires with whom they agreed financial agreements were also paid 25%, which were then added to their invoices.
The decision said that it was illegal for car dealerships to receive a lending commission without obtaining the enlightened consent of the customer to payment.
However, the British lender Close Brothers and the Firtrand of South Africa appealed the decision, landing it before the Supreme Court.
Pic: Istock
What is the second case?
The second case is fired by the Financial Conduct Authority (FCA) and involves discretionary committee agreements (DCAS).
Under these arrangements, brokers and dealers have increased the amount of interest they have gained without talking to buyers and received more commission for this. This would have prompted sellers to maximize interest rates.
The FCA prohibited this practice in 2021. However, a high number of consumers complained to have been overcharged before the entry into force of the prohibition. The Financial Ombudsman Service (FOS) said in May that they were dealing with 20,000 complaints.
In January 2024, the FCA announced an examination to find out if automotive finance customers had been overcharged due to the previous use of the DCA. He uses his powers to examine the historical provisions of the engine financing commission in several companies – which all deny inappropriately acting.
The FCA also said that it was examining a “consumer repair regime” which means that companies should offer appropriate remuneration to customers affected by the issue.
It is estimated that 40% of automotive financing transactions are likely to be eligible for remuneration on automotive financing transactions removed between 2007 and 2021, when the DCAs were prohibited.
To find out how you can find out if you’ve been going to finance cars, Read the following explanator Of our journalist Megan Harwood-Baynes.
Learn more about the Sky News Money blog
Pic: Istock
How does the decision affect potential compensation?
In short, the decision of the Supreme Court could have an impact on the scale and the conclusion of a remuneration regime.
The FCA said in March that it would examine the decision of the court and if it concludes that automotive finance customers had lost generalized shortcomings of companies, it is “probably (to) consult a reparation regime at the level of industry”.
This would mean that affected people would not need to complain, but they would be paid an amount dictated by the FCA.
However, no matter what the court decides, the FCA could go ahead with a repair program.
The regulator said he would confirm if he proposed a program within six weeks of the Supreme Court decision.
Find out more:
Cheap Chinese importing scale advanced to the United Kingdom
The company in Water faces 63 million pounds sterling of penalty on “excessive” wastewater spills
What impact could it have had on lenders?
HSBC analysts said the controversy could be estimated at 44 billion pounds sterling last year.
Alongside the nearby brothers, the companies that could be affected include Barclays, Santander and the largest automotive funding supplier in the United Kingdom, Lloyds Banking Group – which organizes loans thanks to its Black Horse financing arm.
Lloyds has already reserved 1.2 billion pounds sterling to use for potential compensation.
The potential impact on the loan market and the broader economy could be so big that the Chancellor Rachel Reeves plans to intervene to cancel the Supreme Court, according to The guardian.
Treasury officials have examined the potential to adopt new legislation alongside the Ministry of Affairs and Trade which could reduce the potential remuneration bill.
The Treasury said in response to the assertion that she “does not comment on speculation” but hopes to see a “balanced judgment”.